• The COVID-19 pandemic reached Latin America at a time when structural economic and social deficiencies in the region had not been resolved.
  • Resilient and inclusive solutions must be found to address the crises caused or exacerbated by the pandemic and meet the potential risks identified in the Global Risks Report 2022.
  • Internal divisions, polarization, ideological differences or historical frictions and rivalries in the region must be put aside to combine efforts and take advantage of the region’s vast potential.

In early 2022, COVID-19 and its economic and social consequences continue to pose a threat around the world. The pandemic has left a legacy of death, unemployment, greater inequality and poverty. Governments have faced the challenge of maintaining a balance between their primary obligation to preserve lives and the need to safeguard their economies. It has also been a test of their resilience, as they have had to diligently adjust their strategies and measures to respond to the dynamics of changing and uncertain circumstances.

In the case of Latin America and the pandemic, it is important to underline the differences between countries: the diversity of economic and social conditions; the different approaches and policies with which each country has faced the crisis, including the capacity and efficiency of their vaccination programs.

In general terms, the pandemic reached Latin America in a complex regional context where structural economic and social deficiencies had not been resolved. Some countries in the region already maintained low levels of trust in public institutions, citizen dissatisfaction with the quality and coverage of public services, high levels of inequality and labour informality, social protests and acute polarization further exacerbated through social networks.

Furthermore, although there were signs of an economic recovery in late 2021, inflation, depreciation of local currencies and fiscal deficits will all make recovery more complex. According to International Monetary Fund data, it is estimated that GDP had a rebound, growing an average of 6.3% in 2021. A more moderate growth of 3% is estimated in 2022 and growth will not reach the levels prior to the pandemic.

Economic Outlook for Latin America

Regional Economic Outlook for Latin America and the Caribbean, October 2021
Regional economic outlook for Latin America and the Caribbean
Image: IMF

The World Economic Forum’s Global Risks Report 2022 suggests that 16% of global experts and leaders surveyed are optimistic about the outlook for the world and just 11% believe that there will be an expedited recovery from the pandemic. The vast majority of the respondents believe that a degree of uncertainty, volatility and divergence will persist. With regard to Latin America, according to the executive opinion survey carried out in 18 countries of the region, the greatest effects of COVID-19 on social matters are seen as unemployment, livelihood crises and an evident erosion of social cohesion.

When it comes to environmental matters, extreme weather and the reversal of climate action (together with the loss of biodiversity) are classified among the potentially most serious risks for the region in the next decade. On the economic front, there are concerns among those surveyed about prolonged economic paralysis, debt crises, inflation, commodity prices volatility and the collapse of social security systems. Stimulus packages from governments were vital to protect people's incomes, ensure their livelihoods, preserve jobs and keep businesses afloat, but the public debt burden has grown. Public budgets will remain tight after the pandemic, making it clear that greater public-private collaboration is critical.

Global Risks Report 2022
Global Risks Report 2022
Image: World Economic Forum

In relation to connectivity, digital inequality is seen as an imminent threat to the world, since more than 3 billion people remain offline. If left unaddressed, the gap could not only seriously widen between developed and developing economies, but also within countries. Nevertheless, it must also be recognized that many countries and industries were able to quickly access and seamlessly adapt to new forms of digital interaction and remote working, which will likely remain.

This digital leap and the greater dependence on digital systems also leads to greater vulnerability, therefore, rigorous cybersecurity plans must be envisaged. Finally, the “collapse of the State”, the proliferation of illicit economic activities, geo-economic confrontations and the geo-politicization of strategic resources also emerged in the survey as critical concerns, as well as the deterioration of democracies and the earnest phenomenon of migrations.

While pressing internal challenges require immediate attention, the pandemic and its socio-economic consequences have once again demonstrated that global risks do not respect borders or political divergences and shared threats require a coordinated global response. Latin America cannot be conceived of in isolation from the facts and trends prevailing in the rest of the world. On the contrary, there is an evident need to insert ourselves more into the global context, where the region has been losing prominence.

There are, however, some silver-linings and important opportunities that have also emerged. Just as the growing recognition of innovative Latin American start-ups and unicorns has recently attracted significant investment flows, our region, which is endowed with vast natural resources and valuable human capital, should be at the forefront of emerging opportunities in terms of the energy transition, green markets and jobs, modern infrastructure and preparing new generations with the technological capacities and skills aligned to the employment opportunities of the future.

Ignoring the outlined potential risks will not prevent their occurrence, but we must respond to them with responsibility and drive our region’s integration, putting ideological divisions aside and coordinating better to advance innovative solutions that address structural problems. We must promote greater productivity with a long-term vision to provide certainty at national levels and, hopefully, regionally, with a formula that integrates traditional socio-economic indicators with solutions in terms of resilience and inclusion, as well as responses to environmental challenges.

To a large extent, the potential for Latin America to make a better recovery depends on knowing how to apply the lessons learned and the engagement of leaders from all sectors. May the wounds and social and economic scars left by the pandemic serve as a reminder to set aside internal divisions, ideological differences or historical frictions and rivalries, and allow us to outline a pragmatic agenda that ensures that the next decade is not another lost one.